EXHIBIT 10.7
[EXECUTION COPY]
$22,500,000
CREDIT AGREEMENT
dated as of September 18, 2000
between
HOOKER FURNITURE CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN TRUST
and
HOOKER FURNITURE CORPORATION
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
Section 1.1. Definitions...........................................................................3
Section 1.2. Accounting Terms and Determinations...................................................6
ARTICLE II
THE CREDIT
Section 2.1. Commitment to Make ESOP Loan..........................................................6
Section 2.2. The ESOP Note.........................................................................6
Section 2.3. Optional Prepayments..................................................................6
Section 2.4. Mandatory Prepayments.................................................................7
Section 2.5. General Provisions as to Payments.....................................................7
Section 2.6. Computation of Interest...............................................................8
Section 2.7. Non-Recourse Liability................................................................8
ARTICLE III
CONDITIONS TO eSOP LOAN
Section 3.1. Conditions to ESOP Loan...............................................................8
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1. Qualified Plan........................................................................10
Section 4.2. Authorization and Contravention.......................................................10
Section 4.3. Binding Effect........................................................................10
Section 4.4. Litigation............................................................................10
Section 4.5. Filings...............................................................................11
Section 4.6. Use of Proceeds.......................................................................11
ARTICLE V
COVENANTS OF BORROWER
Section 5.1. Operation and Administration..........................................................11
Section 5.2. Reports...............................................................................11
Section 5.3. Notices...............................................................................12
Section 5.4. Use of Proceeds.......................................................................12
Section 5.5. Compliance with Laws..................................................................12
Section 5.6. Exempt Loan...........................................................................12
Section 5.7. Independence of Covenants.............................................................12
ARTICLE VI
COVENANTS OF LENDER
Section 6.1. Operation and Administration..........................................................12
Section 6.2. Reports...............................................................................12
Section 6.3. Compliance with Laws..................................................................13
Section 6.4. Exempt Loan...........................................................................13
Section 6.5. Determination Letter..................................................................13
i
ARTICLE VII
DEFAULTS
Section 7.1. Events of Default....................................................................13
Section 7.2. Limitation on Default................................................................15
ARTICLE VIII
MISCELLANEOUS
Section 8.1. Notices..............................................................................15
Section 8.2. No Waivers...........................................................................15
Section 8.3. Amendments and Waivers...............................................................15
Section 8.4. Successors and Assigns...............................................................15
Section 8.5. Governing Law........................................................................16
Section 8.6. Counterparts; Effectiveness..........................................................16
Section 8.7. Entire Agreement.....................................................................16
Exhibit A - Form of ESOP Note
Exhibit B - Form of ESOP Pledge Agreement
Exhibit C - Form of Opinion of Counsel
ii
CREDIT AGREEMENT
THIS CREDIT AGREEMENT (as amended, supplemented or modified from time
to time, this "Agreement") is dated as of September 18, 2000 and is between the
---------
HOOKER FURNITURE CORPORATION EMPLOYEE STOCK OWNERSHIP PLAN TRUST, a trust
established under the Hooker Furniture Corporation Employee Stock Ownership Plan
(the "Borrower"), acting through U.S. TRUST COMPANY, N.A., as trustee of the
--------
Borrower, and HOOKER FURNITURE CORPORATION, a Virginia corporation (the
"Lender").
------
The Borrower proposes to purchase up to 1,800,000 shares of the common
stock of the Lender and desires to borrow $22,500,000 to finance such purchase.
The Lender is willing to lend $22,500,000 to the Borrower on the terms and
conditions set forth herein. Accordingly, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. The following terms, as used herein, have
-----------
the following meanings:
"Affiliate" means, with respect to any specified Person, any other
---------
Person that directly, or indirectly through one or more intermediaries,
controls, is controlled by or is under common control with the specified Person
(the term "control" meaning possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise).
"Business Day" means any day except a Saturday, Sunday or other day on
------------
which commercial banks in Martinsville, Virginia are authorized by law to close.
"Capital Lease" means a lease that should be capitalized on the
-------------
balance sheet of the lessee prepared in accordance with GAAP.
"Code" means the Internal Revenue Code of 1986, as amended or any
----
similar successor law.
"Common Shares" means the shares of common stock of the Lender
-------------
identified on Schedule 1 to the ESOP Pledge Agreement.
"Debt" means, with respect to any Person at any date, without
----
duplication, (i) all indebtedness for borrowed money, (ii) all obligations,
liabilities and indebtedness secured by any Lien on a Person's property, even
though such Person shall not have assumed or become liable for the payment
thereof (limited, in the case of any such obligation not assumed by such Person,
to the value of such property); (iii) all obligations or liabilities created or
arising under any Capital Lease, conditional sale or
-1-
other title retention agreement; (iv) all accrued pension fund and other
employee benefit plan obligations and liabilities; (v) any liabilities under, or
associated with, interest rate protection agreements; and (v) all deferred
Taxes.
"Default" means any condition or event which constitutes an Event of
-------
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Effective Date" means the date on which this Agreement becomes
--------------
effective in accordance with Section 8.6.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended or any similar successor law.
"ESOP Loan" has the meaning set forth in Section 2.1.
---------
"ESOP Note" has the meaning set forth in Section 2.2.
---------
"ESOP Pledge Agreement" means the Stock Pledge Agreement dated as of
---------------------
September 18, 2000 between the Borrower and the Lender, substantially in the
form of Exhibit B hereto, as such Agreement may be amended, supplemented or
modified from time to time.
"Event of Default" has the meaning set forth in Section 7.1.
----------------
"GAAP" means generally accepted accounting principles in the United
----
States.
"Government" means any Federal, state or local government, authority,
----------
agency, court or other body, officer or entity, and any arbitrator with
authority to bind a party.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
----
charge, security interest or encumbrance of any kind in respect of such asset.
"Obligations" means (i) all amounts now or hereafter payable by the
-----------
Borrower to the Lender under the ESOP Note, (ii) all other obligations or
liabilities now or hereafter payable by the Borrower pursuant to this Credit
Agreement or the ESOP Pledge Agreement, (iii) all obligations and liabilities
now or hereafter payable by the Borrower under, arising out of or in connection
with any documents securing the payment of the obligations referred to in
clauses (i) and (ii) above and (iv) all amounts payable under any renewals or
extensions of any of the foregoing.
"Person" means an individual, a corporation, a partnership, a limited
------
liability company, a limited liability partnership, an association, a trust or
any other entity or
-2-
organization, including a government or political subdivision or an agency or
instrumentality thereof.
"Plan" means the Hooker Furniture Corporation Employee Stock Ownership
----
Plan, as established by the Plan Document.
"Plan Document" means the Hooker Furniture Corporation Employee Stock
-------------
Ownership Plan, as amended and restated effective as of January 1, 2000, and as
may be amended, supplemented or modified from time to time.
"Plan Year" means the calendar year on which the records of the Plan
---------
and the Borrower are kept.
"Pledged Collateral" shall have the meaning set forth in the ESOP
------------------
Pledge Agreement.
"Pledged Shares" means, at any date, those Pledged Shares (as defined
--------------
in the ESOP Pledge Agreement) that have not been theretofore released by the
Lender to the Borrower.
"Taxes" means any fee (including any license, filing or registration
-----
fees), tax (including any income, gross receipts, franchise, sales, use or real,
personal, tangible or intangible property tax), interest equalization or stamp
tax, assessment, levy, impost, duty, charge or withholding of any kind or nature
whatsoever, imposed or assessed by any Government, together with any penalty,
fine or interest thereon.
"Trust Agreement" means the Trust Agreement for the Hooker Furniture
---------------
Corporation Employee Stock Ownership Plan, effective as of August 1, 2000, and
as may be amended, supplemented or modified from time to time.
"Trustee" means U.S. Trust Company, N.A., and any successor trustee or
-------
trustees of the Borrower.
"UCC" means at any time the Uniform Commercial Code as in effect in
---
the Commonwealth of Virginia; provided, however, that if the validity or
-------- -------
perfection of any security interest granted herein is governed by a jurisdiction
other than the Commonwealth of Virginia then, as to the validity or perfection
of such security interest, it shall mean the Uniform Commercial Code in effect
in such other jurisdiction.
Section 1.2. Accounting Terms and Determinations. Unless otherwise
-----------------------------------
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations required hereunder shall be made and all financial
statements delivered hereunder shall be prepared in accordance with GAAP as in
effect from time to time, applied on a basis consistent (except for changes
concurred in by the Borrowers' independent public accountants) with the most
recent financial statements of the Borrowers delivered to the Lender.
-3-
ARTICLE II
THE CREDIT
Section 2.1. Commitment to Make ESOP Loan. The Lender agrees, on the
----------------------------
terms and conditions set forth in this Agreement, to make a non-recourse term
loan (the "ESOP Loan") to the Borrower on the Effective Date in the principal
amount of $22,500,000.
Section 2.2. The ESOP Note. The ESOP Loan shall be evidenced by, and
-------------
shall be repayable with interest in accordance with, a single non-recourse
promissory note substantially in the form of Exhibit A hereto and appropriately
completed (the "ESOP Note"). The Lender shall record, and prior to any transfer
of the Note shall make on the schedule forming a part thereof appropriate
notations to evidence, the date and amount of the ESOP Loan and the date and
amount of each payment of principal made by the Borrower with respect thereto;
provided, however, that any failure of the Lender to make such a notation or any
- -------- -------
error therein shall not in any manner affect the obligation of the Borrower to
repay the ESOP Loan in accordance with the terms of the ESOP Note. The Borrower
hereby irrevocably authorizes the Lender to record such information and to make
such notations. Any recordation by the Lender shall constitute prima facie
----- -----
evidence of the accuracy of the information so recorded.
Section 2.3. Optional Prepayments. The Borrower may prepay the ESOP
--------------------
Loan in whole at any time or from time to time in part on any Business Day by
paying the principal amount to be prepaid together with accrued interest thereon
to the date of prepayment. In the event that aggregate prepayments of principal
of the ESOP Loan during any calendar year exceed $600,000, the amount of such
prepayments exceeding $600,000 shall be applied to the principal installments of
the ESOP Loan in the inverse order of their maturities.
Section 2.4. Mandatory Prepayments. On September 30 of each year,
---------------------
commencing with September 30, 2001, the Borrower shall repay, and there shall
become immediately due and payable, a principal amount of the ESOP Loan
(together with accrued but unpaid interest thereon) equal to the amount, if any,
by which $600,000 exceeds the aggregate amount of any prepayments of principal
of the ESOP Loan made by the Borrower during the 12 calendar months immediately
preceding such September 30. Furthermore, the Borrower shall repay, and there
shall become immediately due and payable, on each date set forth below, a
principal amount of the ESOP Loan (together with accrued but unpaid interest
thereon) equal to the amount, if any, by which the outstanding principal amount
of the ESOP Loan on such date exceeds the amount set forth below opposite such
date:
-4-
Date Maximum Principal Outstanding
---- -----------------------------
January 1, 2004 $18,900,000
January 1, 2008 $15,300,000
January 1, 2012 $11,700,000
January 1, 2016 $ 8,100,000
January 1, 2020 $ 4,500,000
January 1, 2024 $ 900,000
September 1, 2025 $ 0
Section 2.5. General Provisions as to Payments. The Borrower shall
---------------------------------
make each payment of principal of, and interest on, the ESOP Loan not later than
11:00 A.M. (Eastern Time) on the date when due, in Federal or other funds
immediately available in Martinsville, Virginia, to the Lender at the Lender's
address specified in Section 8.1. Whenever any payment of principal of, or
interest on, the ESOP Loan shall be due on a day which is not a Business Day,
the date for payment thereof shall be extended to the next succeeding Business
Day. If the date for any payment of principal is extended by reason of this
Agreement, by operation of law or otherwise, interest thereon shall be payable
for such extended time.
Section 2.6. Computation of Interest. Interest on the ESOP Loan
-----------------------
shall be computed on the basis of a year of 360 days consisting of 12 months of
30 days each.
Section 2.7. Non-Recourse Liability. The Lender shall have no
----------------------
recourse against the Trustee on account of the ESOP Loan, and the Trustee shall
have no personal liability with respect to any obligation hereunder or with
respect to the representations and warranties or covenants contained herein. The
Lender shall have no recourse to the Borrower except to the extent of the
Pledged Collateral and shall have no right to any assets of the Borrower other
than the Pledged Collateral.
ARTICLE III
CONDITIONS TO ESOP LOAN
Section 3.1. Conditions to ESOP Loan. The obligation of the Lender
-----------------------
to make the ESOP Loan is subject to the satisfaction of the following
conditions:
(i) the fact that no Default has occurred and is continuing or
would result from the ESOP Loan;
-5-
(ii) the fact that the representations and warranties of the
Borrower set forth in this Agreement and the ESOP Pledge Agreement are true
and correct on and as of the date of the ESOP Loan, and that the Trustee
has duly authorized the execution, delivery and performance of this
Agreement, the ESOP Note and the ESOP Pledge Agreement;
(iii) the receipt by the Lender of a duly executed ESOP Note, dated
on or before the date of the ESOP Loan, complying with the provisions of
Section 2.2;
(iv) the receipt by the Lender of a duly executed copy of the ESOP
Pledge Agreement, together with certificates representing the Pledged
Shares, duly endorsed in blank;
(v) the receipt by the Lender of a certificate of the Trustee,
dated the Effective Date, certifying that attached thereto is a true,
correct and complete copy of the Trust Agreement as in effect on the
Effective Date;
(vi) the receipt by the Lender of an opinion of Ludwig, Goldberg &
Krenzel, counsel for the Borrower, dated the Effective Date, substantially
in the form of Exhibit C hereto and covering such matters relating to the
transactions contemplated hereby as the Lender may reasonably request;
(vii) the receipt by the Lender of certificates signed by the
Trustee, dated the Effective Date, to the effect set forth in clauses (i)
and (ii) of this Section 3.1;
(viii) each document (including, without limitation, any UCC financing
statements) required by law or reasonably requested by the Lender to be
filed, registered or recorded in order to create in favor of the Lender a
perfected first priority security interest in the Pledged Collateral shall
have been properly filed, registered or recorded in each jurisdiction in
which the filing, registration or recordation thereof is so required or
requested, and the Lender shall have received an acknowledgment copy, or
other evidence satisfactory to it, of each such filing, registration or
recordation;
(ix) the receipt by the Lender of a certificate signed by the
Trustee to the effect that the ESOP Loan is in the interests of, and is
being made for the exclusive purpose of providing benefits to participants
and beneficiaries in the Plan;
(x) the receipt by the Lender of all documents it may reasonably
request relating to the existence of the Borrower and the Trustee's
authority to execute, deliver and
-6-
perform, as applicable, this Agreement, the ESOP Note and the ESOP Pledge
Agreement and the validity of this Agreement, the ESOP Note and the ESOP
Pledge Agreement and any other matters relevant hereto or thereto, all in
form and substance satisfactory to the Lender.
The documents and opinions referred to in this Section 3.1 shall be in form and
substance satisfactory to the Lender.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
Section 4.1. Qualified Plan. The Plan is intended to be a qualified
--------------
plan under section 401(a) of the Code and, to the extent applicable, sections
409 and 4975(e)(7) of the Code. The Borrower is not aware of any fact or
circumstance that will adversely affect the qualification of the Plan under
sections 401(a), 409 and 4975(e)(7) of the Code or the qualification of the
Borrower under section 501(a) of the Code.
Section 4.2. Authorization and Contravention. The execution, delivery
-------------------------------
and performance by the Borrower of this Agreement, the ESOP Note and the ESOP
Pledge Agreement are within its power, have been duly authorized by all
necessary action, require no action by or in respect of, or filing with, any
Government (other than the filing of a request for a determination letter from
the Internal Revenue Service to the effect that the Plan is a qualified plan
under sections 401(a), 409 and 4975(e)(7) of the Code and that the Borrower is a
tax-exempt trust under section 501(a) of the Code) and do not contravene, or
constitute (with or without the giving of notice or lapse of time or both) a
default under, any provision of ERISA or the Code (or any regulations or rulings
thereunder), the Plan Document or the Trust Agreement or of any agreement,
judgment, injunction, order, decree or other instrument binding upon or
affecting the Borrower or result in the creation or imposition of any lien
(other than the lien of the ESOP Pledge Agreement) on any of its assets.
Section 4.3. Binding Effect. This Agreement and the ESOP Pledge
--------------
Agreement constitute valid and binding agreements of the Borrower, and the ESOP
Note, when executed and delivered in accordance with this Agreement, will
constitute a valid and binding obligation of the Borrower, in each case
enforceable against the Borrower in accordance with its terms, except as (i) the
enforceability hereof and thereof may be limited by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and (ii) rights of
acceleration and the availability of equitable remedies may be limited by ERISA
and the Code and by equitable principles of general applicability.
-7-
Section 4.4. Litigation. The Borrower is not aware of any action,
----------
suit or proceeding pending against, or to the knowledge of the Borrower
threatened against or affecting, the Borrower before any Government in which
there is a reasonable possibility of an adverse decision which could materially
adversely affect the Borrower or which in any manner draws into question the
validity of this Agreement, the ESOP Note or the ESOP Pledge Agreement.
Section 4.5. Filings. All actions by or in respect of, and all
-------
filings with, any Government required in connection with the execution, delivery
and performance of this Agreement, the ESOP Note and the ESOP Pledge Agreement,
or necessary for the validity or enforceability hereof and thereof or for the
protection or perfection of the rights and interests of the Lender hereunder and
thereunder, other than the filing of a request for a determination letter from
the Internal Revenue Service to the effect that the Plan is a qualified plan
under sections 401(a), 409 and 4975(e)(7) of the Code and that the Borrower is a
tax-exempt trust under section 501(a) of the Code, will, prior to the date of
delivery hereof or thereof, have been duly taken or made, as the case may be,
and will at all times thereafter remain in full force and effect.
Section 4.6. Use of Proceeds. The Borrower intends to use the
---------------
proceeds of the ESOP Loan exclusively to acquire the Common Shares. The proceeds
of the ESOP Loan will not be used by the Borrower, directly or indirectly, for
the purpose of purchasing or carrying any margin stock or for the purpose of
reducing or retiring any indebtedness that was originally incurred to purchase
or carry margin stock or for any other purpose that might constitute the ESOP
Loan a "purpose credit" within the meaning of Regulation U or Regulation X of
the Board of Governors of the Federal Reserve System. The ESOP Loan will qualify
as an exempt loan under section 4975(d) of the Code (or any successor section
thereto), Section 54.4975-7 of the United States Treasury Regulations (or any
successor section thereto) and Section 408(e) of ERISA (or any successor section
thereto) upon the purchase by the Borrower of the Common Shares with the
proceeds of the ESOP Loan.
ARTICLE V
COVENANTS OF BORROWER
The Borrower agrees that so long as any amount payable hereunder or
under the ESOP Note remains unpaid:
Section 5.1. Operation and Administration. The Plan will at all times
----------------------------
operate and be administered as a qualified plan under section 401(a) of the Code
and, to the extent applicable, sections 409 and 4975(e)(7) of the Code, and in
material compliance with all applicable requirements of ERISA (including Titles
I and II) and the Code, and all applicable regulations thereunder, as may from
time to time be in effect.
-8-
Section 5.2. Reports. The Borrower will deliver or cause to be
-------
delivered to the Lender copies of (i) the Trustee's annual return (Form 5500
Series) and (ii) such other information as the Lender may from time to time
reasonably request.
Section 5.3. Notices. The Borrower will promptly notify the Lender if
-------
a Default or an Event of Default shall occur.
Section 5.4. Use of Proceeds. The Borrower will use the proceeds of
---------------
the ESOP Loan exclusively to acquire the Common Shares.
Section 5.5. Compliance with Laws. The Borrower will comply in all
--------------------
material respects with all applicable laws, ordinances, rules, regulations, and
requirements of governmental authorities (including, without limitation, ERISA,
the Code and the rules and regulations thereunder) with respect to its operation
and administration.
Section 5.6. Exempt Loan. The Borrower will take all reasonable steps
-----------
necessary to insure that the ESOP Loan qualifies as an "exempt loan" under
section 4975(d) of the Code, Section 54.4975-7 of the United States Treasury
Regulations and Section 408(e) of ERISA.
Section 5.7. Independence of Covenants. All covenants contained
-------------------------
herein shall be given independent effect. If a particular action or condition is
not permitted by any of such covenants, the fact that such action or condition
would be permitted by an exception to, or otherwise be within the limitations
of, another covenant shall not avoid the occurrence of a Default if such action
is taken or such condition exists.
ARTICLE VI
COVENANTS OF LENDER
The Lender agrees that so long as any amount payable hereunder or
under the ESOP Note remains unpaid:
Section 6.1. Operation and Administration. The Lender will at all
----------------------------
times operate and administer the ESOP as a qualified plan under section 401(a)
of the Code and, to the extent applicable, sections 409 and 4975(e)(7) of the
Code, and in material compliance with all applicable requirements of ERISA
(including Titles I and II) and the Code, and all applicable regulations
thereunder, as may from time to time be in effect.
Section 6.2. Reports. The Lender will file the annual report (Form
-------
5500 Series) for the Plan.
Section 6.3. Compliance with Laws. In connection with the Plan, the
--------------------
Lender will comply in all material respects with all applicable laws,
ordinances, rules, regulations, and
-9-
requirements of governmental authorities (including, without limitation, ERISA
and the rules and regulations thereunder) with respect to its operation and
administration.
Section 6.4. Exempt Loan. The Lender will take all reasonable steps
-----------
necessary to insure that the ESOP Loan qualifies as an exempt loan under section
4975(d) of the Code (or any successor section thereto), Section 54.4975-7 of the
United States Treasury Regulations (or any successor section thereto) and
Section 408(e) of ERISA (or any successor section thereto).
Section 6.5. Determination Letter. The Lender will take all
--------------------
reasonable steps necessary to obtain a determination letter from the Internal
Revenue Service to the effect that the Plan is a qualified plan under sections
401(a) and 4975(e)(7) of the Code and that the Borrower is a tax-exempt trust
under section 501(a) of the Code (or any successor sections thereto), including
the filing of retroactive amendments under section 401(b) of the Code (or any
successor section thereto) or Section 54.4975-11(a)(4) of the United States
Treasury Regulations (or any successor section thereto.
ARTICLE VII
DEFAULTS
Section 7.1. Events of Default. If one or more of the following
-----------------
events ("Events of Default") shall have occurred and be continuing:
(i) the Borrower shall fail to pay when due or within five Business
Days thereafter any principal of or interest on the ESOP Loan or any other
amount payable hereunder or under the ESOP Note after amounts have been
contributed to the Borrower by the Lender pursuant to the Plan or dividends
have been paid on common stock of the Lender held by the Borrower that are
eligible under the Plan for payment hereunder or under the ESOP Note;
(ii) the Borrower shall fail to observe or perform any covenant or
agreement contained in this Agreement (other than those covered in clause
(i) above) for 30 days after written notice thereof has been given to the
Borrower by the Lender (or for such longer period as may be agreed to by
the Lender in writing);
(iii) any representation, warranty, certification or statement made
by the Borrower in this Agreement or the ESOP Pledge Agreement or in any
certificate, financial statement or other document delivered pursuant
hereto or thereto (collectively, the "Documents") shall prove to have been
incorrect in any material respect at the time such documents were
delivered;
-10-
(iv) the Borrower shall fail to make any payment in respect of any
Debt (other than the ESOP Note) when due or within any applicable grace
period; provided, however, that any failure to make any payment in respect
-------- -------
of any such Debt as to which no grace period is provided shall not
constitute an Event of Default until seven days after such payment was due;
(v) (A) the ESOP Pledge Agreement shall cease for any reason to be
in full force and effect or shall cease to be effective to grant a
perfected security interest in the Pledged Collateral with the priority
stated to be created thereby or such security interest shall cease to be in
full force and effect or shall be declared null and void, or the validity
or enforceability of such security interest or the ESOP Pledge Agreement
shall be contested by the Borrower, or the Borrower shall deny that it has
any further liability or obligation under the ESOP Pledge Agreement, or the
Borrower shall fail to perform any of its obligations under the ESOP Pledge
Agreement, or (B) any creditor of the Borrower shall obtain possession of
any of the Pledged Collateral by any means, including, without limitation,
levy, distraint, replevin or self-help, or any such creditor shall
establish or obtain any right in the Pledged Collateral which is equal to
or senior to the security interest of the Lender in the Pledged Collateral;
or
(vi) the Lender shall allege in writing that one or more Events of
Default have occurred and the Borrower shall have failed, after 30 days'
notice thereof from the Lender, to provide reasonably satisfactory evidence
to the Lender that such Events of Default have not in fact occurred;
then, and in every such event, the Lender may, at its option, by notice to the
Borrower, declare the ESOP Note (together with accrued interest thereon) to be
immediately due and payable (and the ESOP Note shall thereupon become
immediately due and payable without presentment, demand, protest or other notice
of any kind, all of which are hereby waived by the Borrower).
Section 7.2. Limitation on Default. Notwithstanding Section 7.1, upon
---------------------
the occurrence of an Event of Default, the value of the Borrower's assets
transferred in satisfaction of the ESOP Loan may not exceed the amount due by
reason of the Default, and if the holder of the ESOP Note is a "disqualified
person" (within the meaning of section 4975(e)(2) of the Code or any successor
section thereto) there shall be no acceleration of payments not yet due from the
Borrower and a transfer of the Borrower's assets in such event shall be
permitted only upon and to the extent of the failure of the Borrower to meet the
payment schedule of the ESOP Loan and only to the extent permitted under Section
2.7.
-11-
ARTICLE VIII
MISCELLANEOUS
Section 8.1. Notices. All notices, requests and other communications
-------
to a party hereunder shall be in writing and shall be given to such party at its
address set forth on the signature page hereof or such other address as such
party may hereafter specify for that purpose by notice to the other. Each such
notice, request or other communication shall be effective (i) if given by mail,
48 hours after such communication is deposited in the mails with first class
postage prepaid, addressed as aforesaid or (ii) if given by any other means,
when delivered at the address specified in this Section 8.1.
Section 8.2. No Waivers. No failure or delay by the Lender in
----------
exercising any right, power or privilege hereunder or under the ESOP Note shall
operate as a waiver thereof, nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies herein provided shall be
cumulative and not exclusive of any rights or remedies provided by law.
Section 8.3. Amendments and Waivers. Any provision of this Agreement
----------------------
or of the ESOP Note may be amended or waived if, but only if, such amendment or
waiver is in writing and is signed by the Borrower and the Lender.
Section 8.4. Successors and Assigns. The provisions of this Agreement
----------------------
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that the Borrower may not assign or
otherwise transfer any of its rights under this Agreement without the prior
written consent of the Lender. The Lender may at any time sell, assign,
transfer, grant participations in or otherwise dispose of all or any portion of
the indebtedness incurred by the Borrower under this Agreement and evidenced by
the ESOP Note. The Lender may furnish any information concerning the Borrower in
its possession from time to time to assignees and participants (including
prospective assignees and participants).
Section 8.5. Governing Law. This Agreement and the ESOP Note shall be
-------------
deemed to be contracts made under seal and shall be governed by and construed in
accordance with the laws of the Commonwealth of Virginia, except as otherwise
provided herein.
Section 8.6. Counterparts; Effectiveness. This Agreement may be
---------------------------
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when the Lender shall have
received counterparts hereof signed by all of the parties.
-12-
Section 8.7. Entire Agreement. This Agreement, the ESOP Note and the
----------------
ESOP Pledge Agreement set forth the entire agreement of the parties with respect
to the subject matter hereof and thereof and supersede all previous
understandings, written or oral, in respect thereof.
[SIGNATURE PAGE FOLLOWS]
-13-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
HOOKER FURNITURE CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN TRUST
By: U.S. TRUST COMPANY, N.A.,
as Trustee
By: /s/ Michael E. Shea
------------------------
Name: Michael E. Shea
Title: Sr. Vice President
600 Fourteenth Street, N.W.
Suite 400
Washington, D.C. 20005
HOOKER FURNITURE CORPORATION
By: /S/ Paul B. Toms, Jr.
--------------------------
Paul B. Toms, Jr.
President
440 East Commonwealth Boulevard
Martinsville, Virginia 24112
-14-
NON-RECOURSE PROMISSORY NOTE
September 18, 2000
For value received, the HOOKER FURNITURE CORPORATION EMPLOYEE STOCK
OWNERSHIP PLAN TRUST, a trust established under the Hooker Furniture Corporation
Employee Stock Ownership Plan (the "Borrower"), promises to pay to the order of
HOOKER FURNITURE CORPORATION, a Virginia corporation (the "Lender"), the
principal sum of $22,500,000 (the "Loan") in installments as hereinafter
provided. The Borrower promises to pay interest on the aggregate unpaid
principal amount of the Loan for each day from the date hereof until paid,
quarterly on each January 1, April 1, July 1 and October 1, commencing on
January 1, 2001, at 8.00% per annum; provided, however, that any principal and,
-------- -------
to the extent permitted by law, any interest on the Loan not paid when due or
within 5 days thereafter shall thereafter bear interest for each day until paid
at 9.00% per annum. Interest on the Loan shall be computed on the basis of a
year of 360 days consisting of 12 months of 30 days each. All payments of
principal and interest shall be made in lawful money of the United States not
later than 11:00 A.M. (Eastern Time) on the date when due, in Federal or other
funds immediately available in Martinsville, Virginia, to the Lender at 440 East
Commonwealth Boulevard, Martinsville, Virginia 24112.
The Lender shall record, and prior to any transfer of this promissory
note shall indorse on the schedule forming a part hereof appropriate notations
to evidence, the date and amount of the Loan and the date and amount of each
payment of principal made by the Borrower with respect thereto. The Borrower
hereby irrevocably authorizes the Lender so to indorse this promissory note and
to attach to and make a part of this promissory note a continuation of such
schedule as and when required; provided, however, that the failure of the Lender
-------- -------
to make such a notation or any error therein shall not in any manner affect the
obligation of the Borrower to repay the Loan in accordance with the terms
hereof. Any recordation by the Lender shall constitute prima facie evidence of
----- -----
the accuracy of the information so recorded.
This promissory note and the obligations evidenced hereby are without
recourse to the Borrower and the Trustee of the Borrower, and the Trustee of the
Borrower shall have no personal liability with respect hereto and no holder
hereof
shall have any right to assets of the Borrower except as provided in the Credit
Agreement dated as of September 18, 2000 between the Borrower and the Lender
(the "Credit Agreement"). The Borrower shall have no obligation to make any
payment hereunder except as provided in Section 2.7 of the Credit Agreement.
The Borrower hereby waives diligence, presentment, protest, notice of
default, dishonor or nonpayment and any other notice and all demands whatsoever
as set forth in the Credit Agreement.
This promissory note is the ESOP Note referred to in, and is entitled
to the benefits of, the Credit Agreement. Terms defined in the Credit Agreement
are used herein with the same meanings. Reference is made to the Credit
Agreement for provisions for the repayment and prepayment hereof and the
acceleration of the maturity hereof.
HOOKER FURNITURE CORPORATION
EMPLOYEE STOCK OWNERSHIP TRUST
By: U.S. TRUST COMPANY, N.A.,
as Trustee
By: /s/ Michael E. Shea
----------------------------
Name: Michael E. Shea
Title: Sr. Vice President
[EXECUTION COPY]
STOCK PLEDGE AGREEMENT
dated as of September 18, 2000
by
HOOKER FURNITURE CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN TRUST
in favor of
HOOKER FURNITURE CORPORATION
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
Section 1.1. Definitions.............................................. 1
Section 1.2. UCC Definitions.......................................... 1
ARTICLE II
THE SECURITY INTERESTS
Section 2.1. The Security Inerests.................................... 1
Section 2.2. Security for Obigations.................................. 2
Section 2.3. Delivery of Pleged Collateral............................ 2
Section 2.4. Scheduled Release of Collateral.......................... 2
Section 2.5. Termination of Security Interests; Release
of Collateral............................................ 2
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1. Authorization and Contravention.......................... 3
Section 3.2. Binding Effect........................................... 3
Section 3.3. Title to Pledged Shares.................................. 3
Section 3.4. Pledged Shares........................................... 3
Section 3.5. Validity, Perfection and Priority of Security Interests.. 3
ARTICLE IV
COVENANTS
Section 4.1. Filing; Further Assurances............................... 4
Section 4.2. Liens on Pledged Collateral.............................. 4
Section 4.3. Change in Law............................................ 4
ARTICLE V
DISTRIBUTION ON COLLATERAL; VOTING
i
Section 5.1. Right to Receive Distributions on Pledged
Collateral; Voting.................................. 4
ARTICLE VI
GENERAL AUTHORITY; REMEDIES
Section 6.1. General Authority.................................... 6
Section 6.2. UCC Rights........................................... 7
Section 6.3. Application of Cash, Sale of Pledged
Collateral........................................... 7
Section 6.4. Rights of Purchasers................................. 9
Section 6.5. Federal Securities Laws.............................. 9
Section 6.6. Other Rights of the Lender........................... 10
Section 6.7. Waiver and Estoppel.................................. 11
Section 6.8. Application of Moneys................................ 12
Section 6.9. Limitation on Remedies............................... 12
ARTICLE VII
MISCELLANEOUS
Section 7.1. Notices.............................................. 12
Section 7.2. No Waivers; Remedies Not Exclusive................... 12
Section 7.3. Amendments and Waivers............................... 13
Section 7.4. Successors and Assigns............................... 13
Section 7.5. Governing Law........................................ 13
Section 7.6. Limitation by Law; Severability...................... 13
Section 7.7. Counterparts; Effectiveness.......................... 14
Schedule 1 - List of Pledged Shares
ii
STOCK PLEDGE AGREEMENT
THIS STOCK PLEDGE AGREEMENT (as amended, supplemented or modified from
time to time, this "Pledge Agreement") is dated as of September 18, 2000 and is
by the HOOKER FURNITURE CORPORATION EMPLOYEE STOCK OWNERSHIP PLAN TRUST, a trust
established under the Hooker Furniture Corporation Employee Stock Ownership Plan
(the "Pledgor"), in favor of HOOKER FURNITURE CORPORATION, a Virginia
corporation (the "Lender").
The Pledgor proposes to enter into a Credit Agreement dated as of
September 18, 2000 (as amended, supplemented or modified from time to time and
including the agreement extending the maturity of, refinancing or otherwise
restructuring all or any portion of the obligations thereunder or under any
successor agreement, the "Credit "Agreement") with the Lender. The Pledgor is
willing to provide collateral security for its obligations under the Credit
Agreement to induce the Lender to enter into the Credit Agreement. Accordingly,
the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. Terms used herein and not defined which
-----------
are defined in the Credit Agreement shall have for the purposes hereof the
meanings set forth therein.
Section 1.2. UCC Definitions. Unless otherwise specified herein, or
---------------
unless the context otherwise requires, all terms used in this Pledge Agreement
which are defined in the Uniform Commercial Code as in effect in the
Commonwealth of Virginia shall have the meanings set forth therein.
ARTICLE II
THE SECURITY INTERESTS
Section 2.1. The Security Interests. The Pledgor hereby pledges to
----------------------
the Lender, and grants to the Lender a security interest in, the following (the
"Pledged Collateral"):
(i) the shares of the common stock of the Pledgor described on
Schedule 1 hereto (the "Pledged Shares"), and all dividends, distributions,
cash, instruments and other property and proceeds from time to time
received, receivable or otherwise made upon or distributed in respect of or
in exchange for any or all of the Pledged Shares;
(ii) the contributions to the Pledgor made by the Lender to enable
the Pledgor to meet its obligations under the ESOP Note, and all earnings
attributable to such contributions; and
(iii) to the extent not otherwise included in the foregoing, all
cash and non-cash proceeds thereof.
Section 2.2. Security for Obligations. This Pledge Agreement secures
------------------------
the payment of all of the Obligations. The security interests granted by this
Pledge Agreement are granted as security only and shall not subject the Lender
to, or transfer or in any way affect or modify, any obligation or liability of
the Pledgor with respect to any of the Pledged Collateral or any transaction in
connection therewith. Notwithstanding any other provision of this Pledge
Agreement, the Lender's rights with respect to the Pledged Collateral shall be
subject to the applicable limitations of ERISA and the Code and the rules and
regulations issued thereunder.
Section 2.3. Delivery of Pledged Collateral. All certificates or
------------------------------
instruments representing or evidencing the Pledged Collateral shall be delivered
to and held by or on behalf of the Lender pursuant hereto and shall be in
suitable form for transfer by delivery, or shall be accompanied by duly executed
instruments of transfer or assignment in blank, with signatures appropriately
guaranteed, and accompanied in each case by any required transfer tax stamps,
all in form and substance satisfactory to the Lender. The Lender shall have the
right, upon the occurrence of an Event of Default, to cause any or all of the
Pledged Shares or other Pledged Collateral to be transferred of record into the
name of the Lender or its nominee, subject to the limitations set forth in
Section 7.2 of the Credit Agreement.
Section 2.4. Scheduled Release of Collateral. At the end of each Plan
-------------------------------
Year quarter, the Lender shall reassign and deliver to the Pledgor a portion of
the Pledged Shares, and the certificates representing such portion of the
Pledged Shares, and all dividends, distributions, cash, instruments and other
property and proceeds received by the Lender with respect to such portion of the
Pledged Shares. The number of Pledged Shares to be released at the end of a
particular Plan Year quarter shall equal: (i) the number of Pledged Shares held
at the end of such Plan Year quarter (immediately before the release of Pledged
Shares for such Plan Year quarter) multiplied by (ii) the amount of principal
and interest paid by the Pledgor on the ESOP Note during such Plan Year quarter
divided by (iii) the sum of the principal and interest to be paid by the Pledgor
on the ESOP Note for all future Plan Year quarters through September 1, 2025.
Section 2.5. Termination of Security Interests; Release of
---------------------------------------------
Collateral. Upon the full, final and irrevocable payment and performance of all
- ----------
the Obligations and the termination of the Lender's commitment to make the ESOP
Loan to the Pledgor under the Credit Agreement, the security interest in the
Pledged Collateral shall terminate and all rights to the Pledged Collateral
shall revert to the Pledgor. Upon any such termination of the security interests
or any release of the
-2-
Pledged Collateral, the Lender will, at the Pledgor's expense, execute and
deliver to the Pledgor such documents as the Pledgor shall reasonably request to
evidence the termination of the security interests or the release of the Pledged
Collateral. Any such documents shall be without recourse to or warranty by the
Lender.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Pledgor represents and warrants as follows:
Section 3.1. Authorization and Contravention. The execution,
-------------------------------
delivery and performance by the Pledgor of this Pledge Agreement are within its
power, have been duly authorized by all necessary action, require no action by
or in respect of, or filing with, any Government and do not contravene, or
constitute (with or without the giving of notice or lapse of time or both) a
default under, any provision of applicable law or the Plan Document or of any
agreement, judgment, injunction, order, decree or other instrument binding upon
or affecting the Pledgor.
Section 3.2. Binding Effect. This Pledge Agreement constitutes a
--------------
valid and binding agreement of the Pledgor, enforceable against the Pledgor in
accordance with its terms, except as (i) the enforceability hereof may be
limited by bankruptcy, insolvency or similar laws affecting creditors'
rights generally and (ii) the availability of equitable remedies may
be limited by equitable principles of general applicability.
Section 3.3. Title to Pledged Shares. Upon the purchase by the
-----------------------
Pledgor of the Common Shares with the proceeds of the ESOP Loan, the Pledgor
will own the Pledged Shares free and clear of any Liens other than the security
interests granted hereby.
Section 3.4. Pledged Shares. The Pledged Shares have been duly
--------------
authorized and validly issued, are fully paid and non-assessable and are not
subject to any options to purchase or similar rights of any Person. The Pledgor
is not and will not become a party to or otherwise bound by any agreement, other
than this Pledge Agreement, which restricts in any manner the rights of any
present or future holder of any of the Pledged Shares with respect thereto.
Section 3.5. Validity, Perfection and Priority of Security
---------------------------------------------
Interests. Upon delivery to the Lender of all certificates or instruments
- ---------
representing or evidencing the Pledged Shares, the Lender will have a valid and
perfected security interest in the Pledged Collateral subject to no prior Lien.
No registration, recordation or filing with any Government is required in
connection with the execution or delivery of this Pledge Agreement, or necessary
for the validity or enforceability hereof or for the perfection of the security
interests of the
-3-
Lender granted hereby. The Pledgor has not performed any acts which might
prevent the Lender from enforcing any of the terms and conditions of this Pledge
Agreement or which would limit the Lender in any such enforcement.
ARTICLE IV
COVENANTS
The Pledgor agrees that so long as the Lender is committed to make the
ESOP Loan to the Pledgor under the Credit Agreement or any Obligation remains
unpaid:
Section 4.1. Filing; Further Assurances. The Pledgor will, at its
--------------------------
expense and in such manner and form as the Lender may require, execute, deliver,
file and record any financing statement, specific assignment or other paper and
take any other action that may be reasonably necessary or desirable, or that the
Lender may request, in order to create, preserve, perfect or validate the
security interests granted hereby or to enable the Lender to exercise and
enforce its rights hereunder with respect to any of the Pledged Collateral. To
the extent permitted by applicable law, the Pledgor hereby authorizes the Lender
to execute and file, in the name of the Pledgor or otherwise, UCC financing
statements which the Lender in its sole discretion may deem reasonably necessary
or appropriate to further perfect the security interests.
Section 4.2. Liens on Pledged Collateral. The Pledgor will not sell
---------------------------
or otherwise dispose of, or grant any option with respect to, any of the Pledged
Collateral or create or suffer to exist any Lien (other than security interests
in favor of the Lender) on any Pledged Collateral. The Pledgor will defend the
Pledged Collateral and the Pledgor's rights with respect thereto against, and
take such action as is necessary to remove, any Lien with respect to the Pledged
Collateral other than the security interests granted to the Lender hereunder.
Section 4.3. Change in Law. The Pledgor will promptly notify the
-------------
Lender in writing of any change in law known to it (and will use its best
efforts to become aware of any such change in law) which (i) adversely affects
or will adversely affect the validity, perfection or priority of the security
interests in any material respect or (ii) requires or will require a material
change in the procedures to be followed in order to maintain and protect the
validity, perfection and priority of the security interests.
ARTICLE V
DISTRIBUTIONS ON COLLATERAL; VOTING
Section 5.1. Right to Receive Distributions on Pledged Collateral;
----------------------------------------------------
Voting.
- ------
-4-
(a) So long as no Event of Default shall have occurred and be
continuing:
(i) the Pledgor shall be entitled to exercise any and all voting
and other consensual rights pertaining to the Pledged Collateral or
any part thereof for any purpose not inconsistent with the terms of
this Pledge Agreement or the Credit Agreement; provided, however,
-------- -------
that, unless otherwise prohibited by applicable law, the Pledgor shall
not exercise or refrain from exercising any such right if, in the
Lender's reasonable judgment, such action would have
a material adverse effect on the value of the Pledged Collateral or
any part thereof, and, provided further, that, with respect to
-------- -------
extraordinary corporate matters, the Pledgor shall give the Lender at
least five days' written notice of the manner in which it intends to
exercise, or the reasons for refraining from exercising, any such
right.
(ii) The Pledgor shall be entitled to receive and retain any
and all dividends and other payments and distributions made upon or
with respect to the Pledged Collateral; provided, however, that any
-------- -------
and all
(1) dividends and other distributions paid or payable
other than in cash in respect of, and instruments and
other property received, receivable or otherwise
distributed in respect of, or in exchange for, any
Pledged Collateral,
(2) dividends and other distributions paid or payable
in cash in respect of any Pledged Collateral in
connection with a partial or total liquidation or
dissolution or in connection with a reduction or
capital, capital surplus or paid-in-surplus, and
(3) cash paid, payable or otherwise distributed in
respect of principal of, in redemption of, or in
exchange for, any Pledged Collateral, shall be, and
shall be forthwith delivered to the Lender to hold as
Pledged Collateral or to pay amounts owing under the
ESOP Note and shall, if received by the Pledgor, be
received in trust for the benefit of the Lender, be
segregated from the other property or funds of the
Pledgor and be forthwith delivered to the Lender as
Pledged Collateral in the same form as so received
(with any necessary endorsement).
(iii) The Lender shall execute and deliver (or cause to be
executed and delivered) to the Pledgor all such proxies, powers of
attorney, consents, ratifications, waivers and other instruments as
the Pledgor may reasonably request to enable the Pledgor to exercise
the voting and
-5-
other rights which it is entitled to exercise pursuant to paragraph (i) above
and to receive the dividends which it is authorized to receive and retain
pursuant to paragraph (ii) above.
(b) Upon the occurrence and during the continuance of an Event
of Default:
(i) Unless otherwise prohibited by applicable law, all
rights of the Pledgor to exercise the voting and other consensual
rights which it would otherwise be entitled to exercise pursuant to
paragraph 5.1(a)(i) and to receive the dividends which it would
otherwise be authorized to receive and retain pursuant to paragraph
5.1(a)(ii) shall cease, and all such rights shall thereupon become
vested in the Lender which shall thereupon have the sole right to
exercise such voting and other consensual rights and to receive and
hold as Pledged Collateral such dividends and interest payments.
(ii) All dividends which are received by the Pledgor
contrary to the provisions of paragraph 5.1(a)(i) shall be received in
trust for the benefit of the Lender, shall be segregated from other
funds of the Pledgor and shall be forthwith delivered to the Lender as
Pledged Collateral in the same form as so received (with any necessary
endorsement).
ARTICLE VI
GENERAL AUTHORITY; REMEDIES
Section 6.1. General Authority. The Pledgor hereby
-----------------
irrevocably appoints the Lender and any officer or agent thereof, with full
power of substitution, as its true and lawful attorney-in-fact, in the name of
the Pledgor or its own name, for the sole use and benefit of the Lender, but at
the Pledgor's expense, at any time and from time to time, to take any and all
appropriate action and to execute any and all documents and instruments which
may be necessary or desirable to carry out the terms of this Pledge Agreement.
The Pledgor hereby ratifies all that said attorneys shall lawfully do or cause
to be done by virtue hereof. This power of attorney is a power coupled with an
interest and shall be irrevocable.
Without limiting the foregoing, the Pledgor hereby gives the
Lender the power and right on its behalf, without notice to or further assent by
the Pledgor, to do the following:
(i) to receive, take, endorse, assign and deliver any and all
checks, notes, drafts, acceptances, documents and other negotiable and non-
negotiable instruments taken or received by the Pledgor as, or in
connection with, the Pledged Collateral; and
-6-
(ii) to do, at its option, but at the expense of the Pledgor, at any
time or from time to time, all acts and things which the Lender deems
necessary to protect or preserve the Pledged Collateral and, upon the
occurrence of an Event of Default, to realize upon the Pledged Collateral.
Without limiting the foregoing, the Pledgor hereby gives the Lender
the power and right on its behalf, with the written approval of the Trustee of
the Pledgor or, upon the occurrence of an Event of Default, without notice to or
further assent by the Pledgor, to do the following:
(i) to demand, sue for, collect, receive and give acquittance for
any and all monies due or to become due upon or in connection with the
Pledged Collateral;
(ii) to commence, settle, compromise, compound, prosecute, defend or
adjust any claim, suit, action or proceeding with respect to, or in
connection with, the Pledged Collateral; and
(iii) to sell, transfer, assign or otherwise deal in or with the
Pledged Collateral or any part thereof, as fully and effectually as if the
Lender were the absolute owner thereof.
Section 6.2. UCC Rights. If an Event of Default shall have occurred,
----------
the Lender may in addition to all other rights and remedies granted to it in
this Pledge Agreement and in any other agreement securing, evidencing or
relating to the Obligations, exercise (i) all rights and remedies of a secured
party under the UCC (whether or not in effect in the jurisdiction where such
rights are exercised) and (ii) all other rights available to the Lender at law
or equity.
Section 6.3. Application of Cash; Sale of Pledged Collateral.
-----------------------------------------------
(a) The Pledgor expressly agrees that if any Event of Default shall
occur and be continuing, the Lender, without demand of performance or other
demand or notice of any kind (except the notice specified below of the time and
place of any public or private sale) to or upon the Pledgor or any other Person
(all of which demands and/or notices are hereby waived by the Pledgor), may
forthwith (i) apply the cash, if any, then held by it as collateral as specified
in Section 6.8 and (ii) if there shall be no such cash or if such cash shall be
insufficient to pay Obligations in full, to collect, receive, appropriate and
realize upon the Pledged Collateral, and/or sell, assign, give an option or
options to purchase or otherwise dispose of an deliver the Pledged Collateral
(or contract to do so) or any part thereof in one or more parcels (which need
not be in round lots) at public or private sale, at any exchange, broker's board
or at any office of the Lender or elsewhere in such manner as is commercially
-7-
reasonable and, as the Lender may deem best, for cash or on credit or for future
delivery without assumption of any credit risk. The Lender shall have the right
upon any such public sale, and, if the Pledged Collateral is of a type
customarily sold in a recognized market or is of a type which is the subject of
widely distributed standard price quotations, upon any such private sale or
sales, to purchase the whole or an part of the Pledged Collateral so sold, and
thereafter to hold the same, absolutely and free from any right or claim of any
kind. To the extent permitted by applicable law, the Pledgor waives all claims,
damages and demands against the Lender arising out of the foreclosure,
repossession, retention or sale of the Pledged Collateral. The Trustee shall
cooperate as necessary in any such actions as determined by the Lender.
(b) Unless the Pledged Collateral threatens to decline speedily in value or
is a type customarily sold on a recognized market, the Lender shall give the
Pledgor five days' written notice of its intention to make any such public or
private sale or sale at a broker's board or on a securities exchange. Such
notice shall (i) in the case of a public sale, state the time and place fixed
for such sale, (ii) in the case of sale at a broker's board or on a securities
exchange, state the board or exchange at which such sale is to be made and the
day on which the Pledged Collateral, or any portion thereof being sold, will
first be offered for sale and (iii) in the case of a private sale, state the day
after which such sale may be consummated. The Lender shall not be required or
obligated to make any such sale pursuant to any such notice. The Lender may
adjourn any public or private sale or cause the same to be adjourned from time
to time by announcement at the time and place fixed for the sale, and such sale
may be made at any time or place to which the same may be so adjourned. In the
case of any sale of all or any part of the Pledged Collateral on credit or for
future delivery, the Pledged Collateral so sold may be retained by the Lender
until the selling price is paid by the purchaser thereof, but the Lender shall
not incur any liability in case of the failure of such purchaser to take up and
pay for the Pledged Collateral so sold and, in the case of such failure, such
Pledged Collateral may again be sold upon like notice. The Trustee will
cooperate as necessary in any such actions as determined by the Lender.
(c) Notwithstanding anything in this Section 6.3 to the contrary, upon the
occurrence of an Event of Default, the value of the Borrower's assets
transferred in satisfaction of the ESOP Loan may not exceed the amount due by
reason of the Default, and if the holder of the ESOP Note is a "disqualified
person" (within the meaning of section 4975(e)(2) of the Code or any successor
section thereto) there shall be no acceleration of payments not yet due from the
Borrower and a transfer of the Borrower's assets in such event shall be
permitted only upon and to the extent of the failure of the Borrower to meet the
payment schedule of the ESOP Loan.
-8-
Section 6.4. Rights of Purchasers. Upon any sale of the Pledged
--------------------
Collateral (whether public or private), the Lender shall have the right to
deliver, assign and transfer to the purchaser thereof the Pledged Collateral so
sold. Each purchaser (including the Lender) at any such sale shall hold the
Pledged Collateral so sold absolutely, free from any claim or right of whatever
kind, including any equity or right of redemption of the Pledgor who, to the
extent permitted by law, hereby specifically waives all rights of redemption,
including, without limitation, any right to redeem the Pledged Collateral under
Section 9-506 of the UCC, and any right to a judicial or other stay or approval
which it has or may have under any law now existing or hereafter adopted.
Section 6.5. Federal Securities Laws. In view of the position of the
-----------------------
Pledgor in relation to the Pledged Shares, or because of other present or future
circumstances, a question may arise under the Securities Act of 1933, as now or
hereafter in effect, or any similar statute hereafter enacted analogous in
purpose or effect (such Act and any such similar statute as from time to time in
effect being herein called the "Federal Securities Laws") with respect to any
disposition of the Pledged Collateral permitted hereunder. The Pledgor
understands that compliance with the Federal Securities Laws might very strictly
limit the course of conduct of the Lender if the Lender were to attempt to
dispose of all or any part of the Pledged Collateral, and might also limit the
extent to which or the manner in which any subsequent transferee of any Pledged
Collateral could dispose of the same. Similarly, there may be other legal
restrictions or limitations affecting the Lender in any attempt to dispose of
all or part of the Pledged Collateral under applicable Blue Sky or other state
securities laws or similar laws analogous in purpose or effect. Under applicable
law, in the absence or an agreement to the contrary, the Lender might be held to
have certain general duties and obligations to the Pledgor to make some effort
toward obtaining a fair price even though the obligations of the Pledgor may be
discharged or reduced by the proceeds of a sale at a lesser price. The Pledgor
clearly understands that the Lender is not to have any such general duty or
obligation to the Pledgor, and the Pledgor will not attempt to hold the Lender
responsible for selling any part of the Pledged Collateral at an inadequate
price even if the Lender shall accept the first offer received or does not
approach more than one possible purchaser. Without limiting the generality of
the foregoing, the provisions of this section would apply if, for example, the
Lender were to place all or any part of the Pledged Collateral for its own
account, or if the Lender placed all or any part of the Pledged Collateral
privately with a purchaser or purchasers. Accordingly, the Pledgor expressly
agrees that the Lender is authorized, in connection with any sale of the Pledged
Collateral, if it deems it advisable so to do, (i) to restrict the prospective
bidders on or purchasers of any of the Pledged Collateral to a limited number of
sophisticated investors who will represent and agree that they are purchasing
for their own account for investment and
-9-
not with a view to the distribution or sale of any such Pledged Collateral, (ii)
to cause to be placed on certificates for any or all of the Pledged Collateral
or on any other securities pledged hereunder a legend to the effect that such
security has not been registered under the Federal Securities Laws and may not
be disposed of in violation of the provisions of said laws and (iii) to impose
such other limitations or conditions in connection with any such sale as the
Lender deems necessary or advisable in order to comply with the Federal
Securities Laws or any other law. The Pledgor covenants and agrees that it will
execute and deliver such documents and take such other action as the Lender
deems necessary or advisable in order to comply with the Federal Securities Laws
or any other law. The Pledgor acknowledges and agrees that such limitations may
result in prices and other terms less favorable to the seller than if such
limitations were not imposed, and, notwithstanding such limitations, agrees that
any such sale shall be deemed to have been made in a commercially reasonable
manner, it being the agreement of the Pledgor and the Lender that the provisions
of this section will apply notwithstanding the existence of a public or private
market upon which the quotations or sales prices may exceed substantially the
price at which the Lender sells. The Lender shall be under no obligation to
delay a sale of any Pledged Collateral for a period of time necessary to permit
the issuer of any securities contained therein to register such securities under
the Securities Act of 1933, or under applicable state securities laws, even if
the issuer would agree to do so.
Section 6.6. Other Rights of the Lender.
--------------------------
(a) The Lender (i) shall have the right and power to institute and
maintain such suits and proceedings as it may deem appropriate to protect and
enforce the rights vested in it by this Pledge Agreement and (ii) may proceed by
suit or suits at law or in equity to enforce such rights and to foreclose upon
the Pledged Collateral and to sell all or, from time to time, any of the Pledged
Collateral under the judgment or decree of a court of competent jurisdiction.
(b) The Lender shall, to the extent permitted by applicable law,
without notice to the Pledgor or any party claiming through the Pledgor, without
regard to the solvency or insolvency at such time of any Person then liable for
the payment of any of the Obligations, without regard to the then value of the
Pledged Collateral or any part thereof, and of the profits, revenues and other
income thereof, pending such proceedings, with such powers as the court making
such appointment shall confer, and to the entry of an order directing that the
profits, revenues and other income of the property constituting the whole or any
part of the Pledged Collateral be segregated, sequestered and impounded for the
benefit of the Lender, and the Pledgor irrevocably consents to the appointment
of such receiver or receivers and to the entry of such order.
-10-
(c) In no event shall the Lender have any duty to exercise any rights
or take any steps to preserve the rights of the Lender in the Pledged
Collateral, nor shall the Lender be liable to the Pledgor or any other Person
for any loss caused by the Lender's failure to meet any obligation imposed by
Section 9-207 of the UCC or any successor provision. Without limiting the
foregoing, the Lender shall be deemed to have exercised reasonable care in the
custody and preservation of the Pledged Collateral in its possession if the
Pledged Collateral is accorded treatment substantially equal to that which the
Lender accords its own property, it being understood that the Lender shall not
have any duty or responsibility for (i) ascertaining or taking action with
respect to calls, conversions, exchanges, maturities, tenders or other matters
relative to any Pledged Collateral, whether or not the Lender has or is deemed
to have knowledge of such matters, or (ii) taking any necessary steps to
preserve rights against any parties with respect to any Pledged Collateral.
Section 6.7. Waiver and Estoppel.
-------------------
(a) The Pledgor agrees, to the extent it may lawfully do so, that it
will not at any time in any manner whatsoever claim or take the benefit or
advantage of any appraisal, valuation, stay, extension, moratorium, turnover or
redemption law, or any law permitting it to direct the order in which the
Pledged Collateral shall be sold, now or at any time hereafter in force which
may delay, prevent or otherwise affect the performance or enforcement of this
Pledge Agreement, and hereby waives all benefit or advantage of all such laws.
The Pledgor covenants that it will not hinder, delay or impede the execution of
any power granted to the Lender in the Credit Agreement, the ESOP Note or this
Pledge Agreement.
(b) The Pledgor, to the extent it may lawfully do so, on behalf of
itself and all who claim through or under it, including without limitation any
and all subsequent creditors, vendees, assignees and lienors, waives and
releases all rights to demand or to have any marshalling of the Pledged
Collateral upon any sale, whether made under any power of sale granted herein or
pursuant to judicial proceedings or under any foreclosure or any enforcement of
this Pledge Agreement, and consents and agrees that all of the Pledged
Collateral may at any such sale be offered and sold as an entirety.
(c) The Pledgor waives, to the extent permitted by law, presentment,
demand, protest and any notice of any kind (except the notices expressly
required hereunder) in connection with this Pledge Agreement and any action
taken by the Lender with respect to the Pledged Collateral. The Pledgor waives
and agrees not to assert any privileges which it may acquire under Section 9-112
of the UCC.
-11-
Section 6.8. Application of Moneys. The proceeds of any sale of, or
---------------------
other realization upon, all or any part of the Pledged Collateral shall be
applied by the Lender in the following order of priority:
first, to payment of the expenses of such sale or other realization,
-----
including reasonable compensation to the Lender and its agents and counsel,
and all expenses, liabilities and advances incurred or made by the Lender,
its agents and counsel in connection therewith or in connection with the
care, safekeeping or otherwise of any or all of the Pledged Collateral, and
any other unreimbursed expenses for which the Lender is to be reimbursed
pursuant to Section 6.3;
second, to payment of the Obligations; and
------
third, any surplus then remaining shall be paid to the Pledgor, or its
-----
successors or assigns, or to whomsoever may be lawfully entitled to receive
the same or as a court of competent jurisdiction may direct.
Section 6.9. Limitation on Remedies. Notwithstanding any other
----------------------
provisions of this Pledge Agreement to the contrary, the Lender may not take any
action with respect to the Pledged Collateral in violation of ERISA or the Code,
or the rules and regulations thereunder.
ARTICLE VII
MISCELLANEOUS
Section 7.1. Notices. All notices, requests and other communications
-------
to a party hereunder shall be in writing and shall be given to such party at its
address set forth on the signature page hereof or such other address as such
party may hereafter specify for that purpose by notice to the other. Each such
notice, request or other communication shall be effective (i) if given by mail,
48 hours after such communication is deposited in the mails with first class
postage prepaid, addressed as aforesaid or (ii) if given by any other means,
when delivered at the address specified in this section. Rejection or refusal to
accept, or the inability to deliver because of a changed address or which no
notice was given, shall not affect the validity of notice given in accordance
with this section. Any party giving a notice, request or other communication
hereunder shall send a copy of such communication to Thomas S. Word, Jr.,
Esquire, McGuireWoods LLP, 901 East Cary Street, Richmond, Virginia 23219.
Section 7.2. No Waivers; Remedies Not Exclusive.
----------------------------------
(a) No failure to delay by the Lender in exercising any right, power
or privilege under this Pledge Agreement shall operate as a waiver thereof nor
shall any single or partial
-12-
exercise thereof preclude any other or future exercise thereof or the exercise
of any other right, power or privilege.
(b) No remedy conferred upon or reserved to the Lender in this Pledge
Agreement is intended to be exclusive of any other remedy or remedies, but every
such remedy shall be cumulative and shall be in addition to every other remedy
conferred herein or now or hereafter existing at law, in equity or by statute.
(c) If the Lender shall have proceeded to enforce any right, remedy
or power under this Pledge Agreement and the proceeding for the enforcement
thereof shall have been discontinued or abandoned for any reason or shall have
been determined adversely to the Lender, the Pledgor and the Lender shall,
subject to any determination in such proceeding, severally and respectively be
restored to their former positions and rights under this Pledge Agreement, and
thereafter all rights, remedies and powers of the Lender shall continue as
though no such proceedings had been taken.
(d) All rights of action under this Pledge Agreement may be enforced
by the Lender without the possession of any instrument evidencing any Obligation
or the production thereof at any trial or other proceeding relative thereto.
Section 7.3. Amendments and Waivers. Any provision of this Pledge
----------------------
Agreement may be amended or waived if, but only if, such amendment or waiver is
in writing and is signed by the Pledgor and the Lender.
Section 7.4. Successors and Assigns. The provisions of this Pledge
----------------------
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns.
Section 7.5. Governing Law. This Pledge Agreement shall be governed
-------------
by and construed in accordance with the laws of the Commonwealth of Virginia.
Section 7.6. Limitation by Law; Severability.
-------------------------------
(a) All rights, remedies and powers provided in this Pledge Agreement
may be exercised only to the extent that the exercise thereof does not violate
any applicable provision of law, and all the provisions of this Pledge Agreement
are intended to be subject to all applicable mandatory provisions of law which
may be controlling and to be limited to the extent necessary so that they will
not render this Pledge Agreement invalid, unenforceable in whole or in part, or
not entitled to be recorded, registered or filed under the provisions of any
applicable law.
(b) If any provision hereof is invalid and unenforceable in any
jurisdiction, then, to the fullest extent
-13-
permitted by law, (i) the other provisions hereof shall remain in full force and
effect in such jurisdiction and shall be liberally construed in favor of the
Lender in order to carry out the intentions of the parties hereto as nearly as
may be possible and (ii) the invalidity or unenforceability of any provision
hereof in any jurisdiction shall not affect the validity or enforceability of
such provisions in any other jurisdiction.
Section 7.7 Counterparts; Effectiveness. This Pledge Agreement may
---------------------------
be signed in any number of Counterparts, each of which shall be an original,
with he same effect as if the signatures thereto and hereto were upon the
same instrument. This Pledge Agreement shall become effective when the Lender
shall have received counterparts hereof signed by both parties.
[SIGNATURE PAGE FOLLOWS]
-14-
IN WITNESS WHEREOF, the parties hereto have caused this Pledge
Agreement to be duly executed as of the day and year first above written.
HOOKER FURNITURE CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN TRUST
By: U.S. TRUST COMPANY, N.A.,
as Trustee
By: /s/ Michael E. Shea
------------------------
Name: Michael E. Shea
Title: Sr. Vice President
600 Fourteenth Street, N.W.
Suite 400
Washington, D.C. 20005
HOOKER FURNITURE CORPORATION
By: /s/ Paul B. Toms, Jr.
----------------------------
Paul B. Toms, Jr.
President
440 East Commonwealth Boulevard
Martinsville, Virginia 24112
-15-
Schedule 1
List of Pledged Shares
----------------------
Name of Issuer Class of Stock Certificate # # of Shares
- -------------- -------------- ------------- -----------
Hooker Furniture
Corporation Common Stock HFC 2117 1,799,894
Hooker
Furniture Common Stock HFC 2134 106
Corporation
-16-